Lebanon is losing momentum in its push to form a government and clean up state finances, putting billions of dollars of donor investment pledges at risk, senior World Bank officials said on Friday.
Six months after parliamentary elections, Prime Minister-designate Saad al-Hariri has hit a wall in his effort to form a national unity government as political factions jostle for positions in the new cabinet.
A new government must be in place before any moves towards fiscal reform, which the International Monetary Fund said in June are urgently needed to put the country’s debt on a sustainable footing.
More than $11 billion of international donor funding is also contingent on tangible commitment to economic reform.
World Bank Regional Director Saroj Kumar Jha said Lebanon was running out of time to access the funding, given the many other countries in need of investment.
“There is generally that sense even in this city among the donors and the ambassadors that we have lost the momentum,” said Jha.
“If they don’t move fast ... (donors) will start moving a lot of these resources elsewhere. The risk is very real,” he said at the World Bank’s offices in Beirut.
Speaking alongside Jha, Vice President for the Middle East and North Africa Ferid Belhaj said: “We as a bank believe that Lebanon needs to make an effort.”
Third largest public debt
Lebanon has the world’s third largest public debt-to-GDP ratio at around 150 percent, stagnant economic growth and what the IMF has called increasing vulnerabilities in its financial system.
In October, the World Bank said Lebanon’s risk profile was rising sharply and cut its 2018 GDP growth forecast to 1 percent from 2 percent.
Belhaj said Lebanon was doing badly compared to other struggling countries in the region such as Morocco, Tunisia and Egypt.
“We have an engagement with each of these countries and we see a level of commitment from governments (and)... the private sector ... We don’t see the same here,” Belhaj said.
The World Bank has committed $2.2 billion for projects in Lebanon including transport and job creation. But around $800 million is unused while awaiting government approval and Lebanon must pay commitment fees on it.
In a statement from his office on Friday, Hariri said he was hopeful that Lebanon could emerge from its political stalemate.